Papua New Guinea real estate sentiment survey 2017

HAUSPLES.COM.PG RESEARCH

REAL ESTATE SENTIMENT SURVEY2017

MAY 2017 1

CONTENTS

3

Introduction

5

Respondents Profile

6

Survey Highlights Detailed Findings

8

Rental Market

10

Property Purchases

12

Buying Power & Insurance

14

Professionalism & Market Information Conclusion

15

Desired Changes

16

The Bright Side

17

Acknowledgments

2

INTRODUCTION

Hausples.com.pg, Papua New Guinea’s leading real estate portal, is excited to share the results of the 2017 Real Estate Consumer Sentiment Survey.

The survey sheds light on crucial information vital for property industry professionals such as Government authorities, developers, investors, insurers, financial institutions, personal home hunters, and real estate agents. “On behalf of our team, I would like to thank everyone who took the time to fill out the survey.

We are sure your input will be useful in addressing the challenges and opportunities of the PNG real estate market.�

Mathew Care CEO Hausples.com.pg

The survey was distributed over various digital and physical channels to over 2,000 respondents in both Papua New Guinea and globally. Most respondents were citizens of Papua New Guinean. Survey questions were divided between the rental and sales markets, financial literacy and the real estate industry generally.

In terms of the rental market, ~45% of respondents are considering renting a property over the next 2 months, confirming that demand for rental housing is incredibly high. Roughly 45% of respondents are prepared to spend over K2,000 per month renting and 40% consider that renting is either somewhat affordable through to very affordable.

Property purchase is now an extremely high priority for Papua New Guineans, with over half of respondents (55%) stating an intention to purchase over the next 12 months. Sentiment toward housing is also buoyant with 61% of people believing that now is a good time to buy a home. This is despite (or perhaps even the result of) a highly prevalent belief that property prices have increased over the last 12 months (67% of people).

3

INTRODUCTION (CONTINUED)

Purchasing power and financial literacy are also rapidly improving with 85% of people prepared to contribute a deposit of 10% or more toward a future purchase and 77% indicated that they will fully insure their future home. Whilst 70% of home hunters intend to spend less than K500,000 on their next home, a substantial proportion (20%+) will spend between K500,000 - K1 million, and 10% will spend K1 million or more.

“We are seeing many positive changes to the Real Estate market in PNG and this survey highlights much of the critical data that is required to push the market forward.”

Tom Snelling General Manager Hausples.com.pg

The overall results of the survey confirm very positive sentiment toward home ownership and the prospects for the real estate market. However, whilst there is clearly substantial demand for housing, supply remains highly constrained. This is evidenced in respondent's primary concern for the real estate industry as “land tenure and the availability of freehold land” (over 60% of respondents). Indicating that Papua New Guineans are well aware of the complexities of the country’s customary land tenure system and the pressure this places on the availability of land for purchase.

We wish to thank all those who participated in this critical survey and we hope that it serves as a useful source of information for both the public and private sectors.

4

RESPONDENTS PROFILE

The survey attracted over 2,000 respondents; likely the largest real estate sentiment survey in PNG history. The sample size provides statistical accuracy of over 97%. Respondents were mostly PNGborn, yet the survey also captured respondents from nations such as Australia, China, America, Malaysia, the Philippines the South Pacific and other countries.

The majority of the respondents were male (58.1%), while female respondents stood at

2,000

RESPONDENTS LIKELY THE MOST COMPREHENSIVE REAL ESTATE SENTIMENT SURVEY IN PNG HISTORY

41.9%. Most surveyed were aged between

Slightly over 19% of respondents indicated

31-40 years old, followed by 21-30 year

their profession as Government employees;

olds, and finally those in the 41-50 year age

12.77% were in Banking & Finance; followed

brackets.

by 6.18% in Real Estate & Construction. Oil

Over half (57.11%) of the respondents live

and Mining accounted for 13.11 percent,

with their parents, while 15.64% reside with

Students 3.51%, Security staff 3.51%, and

their family. 21.28% live on their own.

Restaurant, Hotel or Hospitality services

The considerable number of 21-40 year olds who reside with their family could be due to cultural obligations such as caring for family

employees 3.26%. The remaining respondents (35.23%) indicated other means of work.

elders; it may also further indicate the lack of available housing.

5

OVERALL PROFILE OF RESPONDENTS (AGGREGATED)

6

OVERALL PROFILE OF RESPONDENTS (AGGREGATED)

7

DETAILED FINDINGS:

Rental Market

Landmass in major cities of Port Moresby and Lae have predominantly been under customary ownership, and while they could previously maintain steady supply and demand for properties, an economic boom triggered by the PNG LNG Project in 2005 led to a significant migration to these cities. This swelled their populations and hiked property prices due to a shortage of housing supply in PNG’s main urban areas, which still persists today.

Interestingly, most respondents (38.64%) chose condos/apartments as the property type they would most likely want to rent, followed by

Slightly over 45.5% of survey respondents

PNG-style houses (32.58%t), Western-style

considered renting a property within the next

house (25%) and commercial property (2.27%).

two months, followed by a preference to rent a

Land, was the least preferred property type to

property within the next 2-4 months (17.61%),

rent with only 1.52% of those surveyed

and 4-6 months (8.45%). Lastly, more than 20%

selecting this preference.

prefer to wait beyond 6 months before renting.

Over half the respondents stated they were likely to spend less than K2,000 per month on property rentals, followed by K2,001-K3,000 per month (14.79%), K3,001-K4,000 per month (14.08%), K5,001-K8,000 per month (4.93%), K8,001-K10,000 per month (2.82%) and over K10,000 per month (5.63%).

Perhaps surprisingly, apartments and condos remain highly popular rental properties.

This is followed closely by PNG and Western style houses.

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DETAILED FINDINGS:

Rental Market

When asked what were the major factors people consider when renting a property, respondents deemed price as the most important factor. This was followed by security, proximity to public transport & services, noise, neighbours and proximity to family.

An overwhelming percentage (76.07%) of respondents stated they are currently renting a property.

With respect to perceived affordability of rental properties, only 3.22% considered housing in PNG to be very affordable, with the majority (60.34%) deeming it very unaffordable. 25.60% stated it was moderately unaffordable, while smaller percentages agreed that PNG housing was affordable (7.79%) and moderately affordable (3.04%).

These figures tied in with the prevalent notion (66.52%) that property prices had increased during the past 12 months. Only 10.14% believed property prices to have deceased while 23.34% noted that it has not changed over the last year.

Aside from price, security is ranked as the number one factor when selecting a rental property.

A strong majority (65.5%) of people believe that property prices have increased over the last 12 months.

9

DETAILED FINDINGS:

Property Purchase

Readiness to Buy

Very encouragingly, 23.12% intend to buy a property within 6-12 months, with just over half (55.94%) of respondents seeking to buy in the next 12 months. Slightly over 16% of people are considering purchasing within 12-18 months, whilst 26% said they would prefer to wait 18months or more before purchasing.

These results are very encouraging for the real estate and financial services sectors and bode well for PNG economy in general.

Only 13.54% of survey respondents already own a property outright, while 10.39% said they own their property with the help of a loan from the bank.

Though prices are deemed high, the majority of people still feel that now is an opportune time to purchase (61.77%). While 13.07% stated the current period is more suitable for selling a property.

Although prices are perceived to be high, most people believe now is a good time to buy.

More than 50% of people intend to purchase a home in the next 12 months.

Slightly over 25% said it was better to keep renting. This is likely due to skyrocketing property prices, thanks to a shortage of freehold and long-term leasehold land. The price of some high-end expatriate style properties in Port Moresby exceed equivalent accommodation in Manhattan New York.

10

DETAILED FINDINGS:

Property Purchase

Over 80% chose Port Moresby as their preferred location to buy a property, followed by Morobe & East New Britain.

Those who preferred to buy land equaled

In terms of location, Port Moresby remains by

24.73%, which is a strong indicator of a

far the preferred place to own a home with over

willingness to develop more properties, while

80% of respondents indicating that they would

only 7.29% preferred condos and/or

like to buy in the capital. Lae is the second

apartments - a stark contrast compared to

preferred location, followed by East New Britain,

rental preferences. Over 30% said they would

Madang and Milne Bay.

most likely buy a PNG-style house (a timberframed, high-set building with seating or parking area underneath), followed by 27.7% who opted for Western-style homes (brick and mortar).

As can be expected, commercial property the

The latter three provinces are popular tourist hotspots as well as agricultural centres, which may indicate respondent’s strategic approach in terms the best places to invest. This may also be an alternative reason for the popularity of purchases.

least likely real estate type for people intending to buy at only 3.59%.

Nearly a quarter of all respondents cited land as their first choice of property, indicating consistent strong demand for new landed property developments.

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DETAILED FINDINGS:

Buying Power and Insurance

Despite the long time prevalence of customary land ownership (stretching back to the precolonial era), working-class Papua New Guineans are beginning to understand the value that homeownership brings to their families and they are increasingly investing in their own properties. Results showed that 70% of people intend to spend less than K500,000 on a property, whilst 30% are intending spend up to K1 million or more.

Financial literacy is also rapidly increasing, with 85% of people expecting to pay a deposit of 10% or more to complete their purchase.

This level of understanding can be attributed to significant campaigns by Papua New Guinea’s leading banks, such as the Bank of South Pacific, which has invested heavily in consumer education.

The Bank of South Pacific, in conjunction with the Papua New Guinea Government, has also released an incredibly popular First Home Ownership Loan Scheme (FHOS) which makes low interest loans available to low and middle

Price, location and security were noted as leading factors of importance when buying property, followed by surrounding infrastructure, low interest rates and return on investment; while an overwhelming percentage (81.59) expect a mortgage for their next property purchase.

Most revealing, a majority of 71% said they were likely to spend less than K500,000 on the purchase of a property.

income Papua New Guineans. Thus far, this scheme has made home ownership a reality for many people.

Financial literacy is rapidly increasing with 85% of respondents anticipating that they will provide a housing deposit of 10% or more.

12

DETAILED FINDINGS:

Buying Power and Insurance Expected purchase price

Just 3.10% of people do not currently intend to take out insurance on their home. These results are extremely positive for insurance companies in the PNG market and validate ongoing efforts to educate people about the importance of insuring what is often their biggest asset.

Expected deposit (%)

When questioned in regarding the amount they intend to spend on their next property purchase, 12.89% were willing to spend K500,001-K600,001 on a property, followed by those who could afford K700,001-K1,000,000 (4.53%), K600.001-K700.000 (3.60%), K1,000,001-K2, 000,000 (3.14%), K2000,000-

Intention to buy insurance

K4,000,000 (2.32%), and over K4,000,000 (1.63%).

A majority of 43.15% expect to make a 10% deposit toward their property purchase, followed by 30% of survey respondents expecting to make a deposit of between 2040%.

When considering a home loan, interest rates were cited as the most important factor, followed by bank fees, response time, the lender’s market knowledge and reputation.

It was positive to note that 76.9% of respondents intend to insure their property, whilst 20% of people are undecided about whether to insure.

Most people intend to spend less than K500,000 on home.

However a substantial proportion of people (over 20%) have budgets of between K500,000 to K1 million, with nearly 4% intending to spend k2 million plus.

13

DETAILED FINDINGS:

Professionalism & Market Information

Real estate agents play a key role in PNG property market as facilitators of sale and rental, and are expected to practice with integrity.

Close to 30% of survey respondents said honesty was the most important factor they sought when selecting their real estate agent.

Other qualities that were pinpointed included professionalism (24.52%), commission fee and price of services (16.19%), reputation (11.40%), knowledge (8.10%) and response time (7.87%).

In terms of access to market information, online sources are becoming an important avenue for people to research the market.

However it must be remembered that this survey was conducted in an online forum.

Hausples.com.pg was nominated as a useful source of markets news, developments and statistics by 72.75% of survey respondents.

The Post Courier and The National newspapers followed closely in order of importance, together with preferences for visiting real estate agents directly and social media channels such as Facebook.

Close to 30% of respondents nominated honesty as the single most important factor when selecting a real estate agent.

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CONCLUSION

Desired Changes

Housing is a critical factor in the continued development of PNG. The country’s

Changes the Respondents most like to see introduced in PNG Real Estate Industry

urbanisation rate of 12 percent is incredibly low compared to global standards (by comparison, South East Asia’s least urbanised country is Cambodia at 24%); and this is particularly the case considering that an estimated 20% of people live in the urban capitals of Port Moresby, Lae and Madang.

Restrictions to purchasing customary titles directly from indigenous clans correlated with feedback on the changes that survey respondents want most for PNG’s real estate industry.

Nearly 60% selected land title ownership and the availability of freehold land as the most pressing factors that need changing in PNG real estate industry, followed by increased regulation and certification of PNG real estate agents (39%).

The overwhelming majority of people cited land title ownership and the availability of freehold land as the most important issues requiring change.

15

CONCLUSION

The Bright Side

Papua New Guinea’s property market is relatively restricted to non-customary land, however, the government and private enterprises are doing a great deal to address the critical housing shortage which has resulted from these legal structures.

In terms of affordable and middle-income housing, there are between 5,000 - 6,000 new homes forecasted to be built in Port Moresby over the next 18 months, with up to 50,000 additional homes slated to be build by 2020. These comprise major government initiatives such as the National Housing Commission’s mega-development at Duran Farm which will comprise 44,000 dwellings (standalone 2-3 bedroom houses). There are also some other smaller private developments such as Mediterranean Apartments (48 units comprising bedsit and 2 - 3 bedroom homes), Community Housing Limited’s proposed development at 9 Mile (160 stand alone 3 bedroom houses), and larger developments such as Edai Town which comprises 300 homes (2 - 3 bedroom homes).

This increased supply, when coupled with novel housing initiatives such as the First Home Ownership Loan Scheme and the National Superannuation Fund’s Housing Advance Scheme are excellent positive steps in allowing ordinary Papua New Guineans to purchase a home. These efforts are to be commended and further ways of making additional land available for development should be considered.

Whether customary land should be converted to freehold land is a policy issue for the Government and existing landholders to address. Any moves to convert customary land must be done in full consultation with, and in recognition of, landholder rights inclusive of appropriate compensation. Potentially a voluntary system of conversion might be considered.

Regardless of future initiatives, it is extremely encouraging to see the present efforts to address the housing shortage. These efforts are clearly increasing people’s positivity toward homeownership, education with respect to financial literacy, and general sentiment toward PNG’s property market. All of these factors bode well for the future of PNG’s real estate market and people’s prospects for living in a home.

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ACKNOWLEDGEMENTS

The Papua New Guinea Real Estate Sentiment Survey 2017 has been facilitated by the country’s property portal, Hausples.com.pg, to provide an important overview of consumer trends and preferences. It is hoped that authorities, those in the real estate and construction sphere, and the financial services sector will use the data contained 2017 Real Estate Sentiment Survey constructively and to the advancement of the Papua New Guinea real estate market.

We would like to thank everyone who took the time to complete the survey.

For media or other enquiries, please email: support@hausples.com.pg

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For media and other enquiries, please email: support@hausples.com.pg